Using a shovel to hammer in nails: Misuse of Arbitration clauses

Given the recent examination of Arbitration’s efficacy and fairness in the world of Alternative Dispute Resolution (“ADR”), I was reminded of the customized nature of ADR. Specifically, “blanket or boilerplate” ADR clauses, most commonly formulated as Arbitration, will back-fire into lose-lose scenarios for both sides.

Using a shovel to hammer in nails is always an option, although it may not be the most effective tool for the situation; much like how general application of Arbitration in business conflicts that are ripe for Mediation may be inefficient and lead to escalated exposure.

ADR is by definition an alternative process for the disputants, and as such, we must be mindful of its subjective nature.

Using boilerplate Arbitration provisions in contracts will result in lack of precision when applied, undermining the goals and intentions of each business transaction, and causing a worse problem for the parties, with ultimately higher legal costs.

In this business environment, there must be a balance between consumer and business interests.

Businesses would like a private and expeditious manner of resolving consumer disputes, and consumers require fairness and transparency in the process.

By customizing the ADR clauses up-front at contract creation, both sides can actualize a process that optimizes the interests of both sides, which could involve using more precise mediations.

This proposed paradigm will require consumers to become either educated on their legal options for ADR, or consult with an attorney versed in ADR processes.

Likewise, this scenario will require businesses to earmark a budget for creating internal systems for negotiating ADR provisions at each requested exchange.

Ultimately, if tailoring the ADR process to each specific transaction for a business isn’t appealing, then there still remains the option of using a shovel to hammer in nails!